Is America’s Future Southern?

Yes, answer a number of “pro-growth” types (a distinct species often confused with conservatives). In City Journal, Wendell Cox argues that Texas is eating California’s lunch when it comes to jobs. In Forbes, Joel Kotkin points out that long-term demographic, migration, and investment trends all favor the South over the Northeast and Midwest. The raw numbers are clearly on their side: the South is now the country’s most populous region and its largest economic area.

Why has the South overtaken the historic economic leaders? According to Cox and Kotkin, it’s the result of business-friendly policies that contrast favorably with the expensive and restrictive setup Walter Russell Mead has dubbed the blue social model. Michael Lind agrees, but casts those policies in a less favorable light. Where Cox and Kotkin see an open field for growth, Lind sees a race to the bottom:

Northernomics is the high-road strategy of building a flourishing national economy by means of government-business cooperation and government investment in R&D, infrastructure and education. Although this program of Hamiltonianism (named after Washington’s first Treasury secretary, Alexander Hamilton) has been championed by maverick Southerners as prominent as George Washington, Henry Clay and Abraham Lincoln (born in Kentucky to a Southern family), the building of a modern, high-tech, high-wage economy has been supported chiefly by political parties based in New England and the Midwest, from the Federalists and the Whigs through the Lincoln Republicans and today’s Northern Democrats.

Southernomics is radically different. The purpose of the age-old economic development strategy of the Southern states has never been to allow them to compete with other states or countries on the basis of superior innovation or living standards. Instead, for generations Southern economic policymakers have sought to secure a lucrative second-tier role for the South in the national and world economies, as a supplier of commodities like cotton and oil and gas and a source of cheap labor for footloose corporations. This strategy of specializing in commodities and cheap labor is intended to enrich the Southern oligarchy. It doesn’t enrich the majority of Southerners, white, black or brown, but it is not intended to.

So who’s right? Actually, both sides have part of the truth. But neither puts the pieces together.

Cox and Kotkin are right to reject stereotypes of the South as backwater good only for resource extraction and the supply of cheap labor. First of all, population growth in the South isn’t driven exclusively by low-skill immigration or monstrous families of slack-jawed yokels. Southern states are also destinations for an increasing number of well-educated. What’s more, the growth sectors are often high-tech. Auto manufacturing and energy aren’t the “dumb” industries they once were. The South is now competitive in business services, as well. Finally, while it’s true that wages are lower in the South, so is the cost of living, particularly housing. So people don’t need to earn as much to achieve a reasonable standard of comfort.

Yet Lind is right to point out the importance of “Whig” policies that promote infrastructure, education, and research. The road networks on which Southern sprawl depends isn’t supported by the free market. They’re built and maintained by the federal government. What’s more, growth in the South is being driven by its cities. And hotspots like Raleigh, Austin, and Houston have flourishing universities and STEM sectors that benefit from generous subsidies. Even the low cost of housing in the South is partly attributable to government intervention. The tax code encourages homebuying, which disfavors regions where much of the housing stock is for rent and encourages construction in areas with lots of land and weak zoning regulations.

So the South is enjoying impressive economic success. But it’s succeeding because its economic model is more “Northern” than it appears. That underlying similarity is also likely to find political expression over the next few decades. Even in the South, educated, well-compensated urbanites tend to vote for Democrats. That’s particularly true when they’ve moved from blue states and carried their political and cultural values with them. Atlanta, Austin, Charlotte, Dallas, Nashville, Orlando, and Raleigh all have Democratic mayors. As their population and clout increase, they may lead their states toward more obviously “blue” arrangements.

Northern intellectuals, then, need to get over their snobbery about the South. The Southern model is based on more than beggar-thy-neighbor policies. In any case, it seems to be working. On the other hand, the South’s boosters shouldn’t exaggerate its distinctiveness. Like the North, the South does best when it encourages innovation and high-skill employment. And that takes more than just cutting taxes and regulation.

In sum, there’s more common ground between North and South than meets the eye. It’s just hard to recognize from the anachronistic perspectives that frame so many of our political debates.

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20 Responses to Is America’s Future Southern?

The various commentators also fail to mention the role cheap energy played in the south’s rise over the last half century. For without it, many of the elements upon which the “southern” economic model are predicated (e.g. cheap housing, suburban sprawl, air-conditioning, JIT inventory, etc) would be impossible.

That the federal government is largely responsible for said energy being available in the first place, is surely a conveniently overlooked factoid for most people currently residing south of the Mason-Dixon Line.

While I suspect there are state business policies behind some of this trend, but I believe this is mostly (housing) affordability driving these results. I know Cali people are moving to Texas with no wage increases due to better living (owning a house).

What happens is that in large federations the poorest and most undeveloped units of the federation have incentives to cut taxes and to create subsidies to attract businesses. Besides that, they also have lower labor costs(And not because they don´t have unions).

In China the large industries are moving to the interior provinces in the West precisely due to labor costs, it´s entirely possible to see this dynamic in Brazil. Ireland, hardly a laissez-faire country, used low corporate tax rates to attract business that would go to France or Germany.

The real point here will only be answered if South Carolina and Texas manages to have the same GDP per capita than the Northeast and California and keep attracting industries that otherwise would go to “blue states”.

Good article. Living in the south for the entirety of my life and growing up in Dallas and going to school in Austin it’s been amazing to see the transformation in the local character as more people have moved down here.

“So the South is enjoying impressive economic success. But it’s succeeding because its economic model is more “Northern” than it appears. That underlying similarity is also likely to find political expression over the next few decades. Even in the South, educated, well-compensated urbanites tend to vote for Democrats. That’s particularly true when they’ve moved from blue states and carried their political and cultural values with them. Atlanta, Austin, Charlotte, Dallas, Nashville, Orlando, and Raleigh all have Democratic mayors. As their population and clout increase, they may lead their states toward more obviously “blue” arrangements.”

Bingo. The City Journals and the Kotkins write such things because they think it pleases their ideological masters and yet the reality is, even in hardcore red states, the cites are generally quite blue (which wasn’t true even a decade a half ago). Indeed any kind of growth is going to change the landscape of the Sun Belt. It’s what made Virginia a “purple state”; it made North Carolina and Florida competitive for Obama on a national level. The only thing which keeps a state in the red is large influx of retirees (picture South Carolina, Arizona or Georgia) but they ain’t living forever. Who knows? Our idea of what is a red or blue state may well be very different in 20 years than it is now.

Mr. Goldman, you are being overly generous here. The South is attracting more manufacturing – and auto and enery have never been “dumb” industries – precisely because it can promise an anti-union environment and cheaper, not “cheap,” labor. And this goes for not just American companies but German, Japanese and Korean ones, too. The South is still playing the same economic role it has been playing for the last 100+ years, using the lower cost of labor and the suppression of not just worker militancy but collective bargaining to attract investment.

I’ve had a number of family members and associates move to North Carolina over the last 30 years and I used to tell folks considering such a move that if they were a blue collar worker, they were going to be SOL compared to most of the places they were moving from, but if they were white coller it could be a good move. Then the bottom fell out of the the NC economy, very much including the Research Triangle, and I’m not sure its ever really recovered.

collin says: “While I suspect there are state business policies behind some of this trend, but I believe this is mostly (housing) affordability driving these results. I know Cali people are moving to Texas with no wage increases due to better living (owning a house).”

Folks might be moving because of the lower cost of living, but it is absolutely state policies that keeps the unionization and compensation rates lower than the rest of the country AND the rest of the First World, and the states and their chambers of commerce are not shy about attracting businesses based on those policies.

Derek Leaberry says: “Actually, less economic growth would be best for the South. The ugliest parts of the South are its big cities.”

Really? I have never been to Charlotte or Atlanta or any of the other really big cities in the South, but the commercial sprawl I see in cities like Greenville, NC, which has exploded over the last 30 years, is ugly as sin.

Since the peace dividend cratered after Kosovo with accelerating velocity after 9/11 , huge national subsidies have been sunk into the South ad especially Texas via the growth of US military personnel and bases, support procurement functions for international deployments, maintenance and ordnance supplies directly. Along with this direct subsidy there has been the secondary direct effects of expenditures on military high tech investments with their associated services sector , that is, a great percentage of American and especially Texas high tech is military related.
The indirect subsidy is even greater through the huge jump in oil prices which found monetization in the Houston and Dallas multinational Oil company platforms, corporate HQs and trading centers.

The Texas Realtive Boom may then be entirely or substantially a result of the victory of the War-Oil cartel in shaping American policy towards its desired outcomes: huge military expenditures with high energy prices.

With growing budgetary constraints, without an Iran War, or a created China Cyber war, the spigots are turned off.

Once the War-Oil Boom fades, Texas crashes not back to its pre war depression, but rather skids into a northern province of mexico.

I agree with the poster who says that Greenville, NC is an ugly sprawl of a city. It certainly was when I was last in it twenty years ago. Especially ugly are all the purple pirates that line the streets and buildings.

We moved from San Diego to the South, where I made about the same wages but found better housing (and T-bone steaks, to my wife’s astonishment) were about half the S.D. price.
I’m not telling you where that is.

@Andre: It’s partially because they don’t have unions that they have a lower cost of living. So even union negotiated wages will be lower in AL than in MI, but with a stronger union presence, those wages would go up.

I travel all over the US for work, but I live in Dallas. The reason the South is better than the North? IT’S COLD UP THERE. Yes, Dallas summers are oppressive, but I’ll take shorts and t-shirts over six months of snow any day. Add to that the fact that northern cities tend to be run down and tired-looking while southern cities are fresh. Add to that the fact that northerners tend to be grouchy and boorish, while Southerns tend to be friendly and gracious. Every time I touch down at DFW I’m struck by how glad I am to be home.